In a general sense, the concept of accounting is the systematic recording, maintaining, reporting, and analyzing of business transactions. The business transactions may or may not be monetary. For example, the business transactions may correspond to exchanging money for a good or a service, collecting raw goods, transforming the raw goods into a product, and selling the product, exchanging goods or services between entities, paying interest and principle on a loan, owning assets, etc. Accounting can allow individuals and business entities to use a historical record of the business transactions to predict and optimize future transactions.
Historically, accounting has been performed using a paper-based accounting journal. The advent of computers and the use of computer software for accounting functions has led to greater efficiency and understanding of financial data used for accounting. Specifically, computer software applications provide tools to efficiently calculate and analyze financial data. For example, an experienced, knowledgeable user of spreadsheet software may program the spreadsheet to perform a variety of statistical operations on the financial data and generate graphs in order to optimize future business transactions.
Financial software applications have further improved the efficiency in performing accounting actions. Specifically, financial applications assist a user in organizing, analyzing, and reporting financial data to evaluate a financial situation (past, present, and/or future). For example, financial applications may lead a user through a series of financial questions and provide help when a user has questions about entering financial data. After the user has submitted the financial data to the financial software application, the application may generate reports of the data for governing entities. The reports may assist the user to understand the financial data. Thus, financial applications simplify the task of accounting to aid in the understanding of financial data.